G/SCM/Q2/CHN/114  
 
26 July 2022  
(22-5647) Page: 1/3 
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES  
FOLLOW -UP QUESTIONS POSED BY THE UNITED STATES TO REPLIES1 REGARDING  
THE NEW AND FULL NOTIFICATION OF CHINA2 
The following communication, dated and received on 2 6 July 2022, is being circulated at the request 
of the delegation of the United States . 
 
_______________  
We appreciate China's answers to the United States' questions regarding China's 2021  notification; 
however, some questions were not answered and other a nswers were unclear.  
Question 1  
For the government guidance funds, such as the IC Fund, which are controlled by the central or local 
government, how does the government ensure that the fund is investing consistent with government 
policy for the relevant sector? Has there ever been an ins tance of a government -controlled guidance 
fund investing in a manner inconsistent with government policy for the relevant sector?  
Question 2  
In July of 2017, the credit rating of Hongqiao Group, a large aluminium producer, was downgraded. 
Despite this cre dit downgrading, the following month, the state -owned enterprise, China 
International Trust Investment Corporation (CITIC), bought 807 million new shares and 
USD 320 million of convertible bonds in the company. Why was such a large investment made in a 
company operating in a sector suffering from overcapacity whose credit rating was recently 
downgraded?  
Question 3  
a. Did the CDB sign an agreement with the Ministry of Industry and Information Technology, 
wherein the bank pledged to provide USD 44 billion of investment to support the Made in 
China 2025 program, within the 13th Five-Year Plan Period (2016 -2020)?  
b. Does Chin a disagree with the research in the Journal of Finance in February 2018 that found 
that 95 %of CBD's industrial loans are to state -owned enterprises and that 86 % of provincial 
level state -owned enterprises have loans outstanding with CDB? How is lending alm ost 
exclusively to state -owned enterprises "in line with market -oriented principles" when private 
enterprises in China are more dynamic and profitable than state -owned enterprises?  
c. As originally asked and not answered, to what extent are CDB loans to SOEs 
non-performing?  
d. What companies has CDB's subsidiary, CDB Capital, invested in?  
 
1 G/SCM/Q2/CHN/ 106 (initial questions); G/SCM/Q2/CHN/ 112 (replies to initial questions)  
2 G/SCM/N/3 72/CHN  G/SCM/Q2/CHN/114  
 
- 2 - 
 
  Question 4  
In our initial questions, the United States asked: An examination of the financial statements of 
various fossil fuel companies in China, such Sinopec, PetroChina and CNOOC, indicate the 
government provided financial appropriations totalling  RMB 12.4 billion ( USD 1.8 billion) in 2020.  
Why were these financi al contributions not included in China's notification? In response, China asked 
for references to the relevant documents. The bases for these questions are as follows: Sinopec 
Annual Report; PetroChina Annual Report; CNOOC Energy Development Co., Ltd. Semi -Annual 
Report. Returning to the question originally asked: An examination of the financial statements of 
various fossil fuel companies in China, such Sinopec, PetroChina and CNOOC, indicate the 
government provided financial appropriations totalling  RMB 12 .4 billion ( USD 1.8 billion) in 2020.  
Why were these financial contributions not included in China's notification?  
Question 5   
In our initial questions, the United States asked: An examination of government budget documents 
indicate that 128 billion RMB ( USD 18.3 billion) was spent in 2020 to lower fuel prices.  Why was this 
expenditure not included in China's notification?  In response, China asked for references to the 
relevant underlying document. The basis for this question is the Central Level General P ublic Budget 
Expenditure. Returning to the question originally asked: An examination of government budget 
documents indicate that 128 billion RMB ( USD 18.3 billion) was spent in 2020 to lower fuel prices.  
Why was this expenditure not included in China's no tification?    
Question 6  
In our initial questions, the United States asked: According to government budget documents, 
RMB 4.4 billion ( USD 628 million) was spent in 2020 to support oil, gas, and coal exploration funding 
for various entities.  Why were these  expenditures not included in China's notification? In response, 
China asked for references to the relevant documents. The basis for this question, once again, is the 
Central Level General Public Budget Expenditure. Returning to the question originally ask ed: 
According to government budget documents, RMB 4.4 billion ( USD 628 million) was spent in 2020 
to support oil, gas, and coal exploration funding for various entities.  Why were these expenditures 
not included in China's notification?  
Question 7  
Based on our examination, few if any of the normative measures cited in the notification have been 
published.  Please explain how this is consistent with China Protocol of Accession obligations 
regarding publication of measures pertaining to or affecting trade.  
Ques tion 8  
As we asked initially, are distant water fishing enterprises completely exempt from income tax?  
Question 9  
Why is China notifying funds allocated for "public sewage treatment"? Does China consider that 
funds allocated for public sewage treatment sho uld be notified under Article 25 of the 
Subsidies  Agreement? Please explain.  
Question 10  
What is the difference, if any, between Program 66: Preferential tax policies for enterprises engaged 
in projects of agricultural, forestry, animal husbandry and fishery and Program 27 Preferential tax 
policies for enterprises engaged in projects of agricultural, forestry, animal husbandry and f ishery?  G/SCM/Q2/CHN/114  
 
- 3 - 
 
  Question 11  
The United States initially asked: According to the Domestic Refined Fuel Price Reform Upward 
Adjustment According to the System  notice issued on 31 December 2021 (and earlier iterations of 
this program), purchasers of diesel fuel in th e fishery sector enjoy a preferential price compared to 
other retail purchasers, based on a state determined sales price. In its responses to the 
United  States' questions on China's 2019 Notification, China noted that the program on Domestic 
Refined Fuel P rice Reform Upward Adjustment According to the System  had been repealed. However, 
the system appears to still be in place, having been updated multiple times in each of 2019, 2020, 
and 2021. If the program has been repealed, why does it continue to be upda ted? Please explain 
and provide the legal citation for the repealing legal measure. If the program is on -going, does China 
intend to notify it and publish it in the MOFCOM Gazette? In response to this question, China stated: 
"There is no subsidy for fisher y in terms of the refined fuel price. The footnotes to the tables in the 
Domestic Refined Fuel Price Reform Upward Adjustment According to the System , published on 
31 December 2021, do not include fishery."  
We note that footnote 4 to the tables in the Dome stic Refined Fuel Price Reform Upward Adjustment 
According to the System  states that "other relevant refined oil product pricing policies shall be 
implemented in accordance with the provisions of the Administrative Measures of Oil Prices ." 
Article  4.1 of t he Administrative Measures of Oil Prices  reads that "Gasoline and diesel retail and 
wholesale prices, as well as gasoline and diesel supply prices for social wholesale enterprises, 
railway, transport and other special users, shall be government -guided." Th e Administrative 
Measures of Oil Prices  do not specify what is encompassed by "transport" in Article 4.1, but the 
Administrative Measures are issued pursuant to Zhong Fa (2008) No. 37, Article 3.3 of which states 
that for "[u]rban public transport, rural r oad passenger transport (including inter -island and rural 
waterway passenger transport), forestry, and fisheries (including distant water fisheries)" that "the 
price of refined oil shall be subsidized by the central treasury through special transfer paymen ts." 
In light of the above, please cite the specific measures that indicate fisheries do not benefit from a 
preferential price compared to other retail purchasers of refined fuel prices. Moreover, please clarify 
whether China intends to notify the Domestic  Refined Fuel Price Reform Upward Adjustment 
According to the System  and publish it in the MOFCOM Gazette.  
 
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